Land Reform Key to Progress

January 01, 2005
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by World Grain Staff

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by David McKee

The Ukrainian Grain Association (UGA) was founded seven years ago with the grain trade as the basis of its membership. Today, seventy of its members are corporations and the rest of the membership is made up of private individuals. The principle members are large international grain trading companies such as Cargill, Toepfer, Glencore, Louis Dreyfus, Bunge, W.J. Trading and Ramblers. In addition to these there are a large number of local grain processing companies, some of which are large holding companies in their own right.

World Grain recently talked to Nikolay Kompanets, founding president of the Ukrainian Grain Association and discussed the association’s role in the reform of the country’s grain industry, as it becomes a major world player

WG: First of all, please tell us something about the activities of the Ukrainian Grain Association.

Kompanets: The president and board of directors of the association represent the interests of all grain exporting and importing companies to the government at various levels. For example, when a problem (with wheat shortages due to crop failure) arose in 2003, the Ukraine had to import grain. The association responded well in this crisis to remove government obstacles to imports. On the other hand when it is necessary to export wheat, the association is there to facilitate the trade.

WG: What about reform of the grain sector?

Kompanets: We are preparing the needed laws, including laws regulating grain exports and laws for the support of the agricultural sector. Practically all laws that concern the development of agricultural markets pass through the UGA for discussion before being sent to the Presidium of the Confederation of Ukrainian Associations. One of the most important reforms has been the elimination of any subsidies on the import or export of grain or oilseed crops.

A problem is that the moratorium on land sales has put the brakes on agricultural reform. If land becomes a commodity, the production process will change radically, and grain will become a much more technologically intensive crop. The owner of the land will invest the money necessary. Today no one is doing this.

Everyone is afraid that someone will buy up all the land. But no one is going to take it away. The land should belong to someone who can take care of it and get a good harvest. Yes, today I believe this is the most critical question that must be resolved.

WG: How do you foresee the role of Ukraine in world grain markets?

Kompanets: In 2002 Ukraine became the number six grain exporter in the world. Of course the crop failure for milling wheat in 2003 set us back, but the Ukraine still exported 3.2 million tonnes. Furthermore, our country earned over U.S.$2 billion from the agrarian sector.

Naturally, the country is going to export wheat, barley and other grains. In most years at least 10 million tonnes will be exported. For now our domestic grain requirement is 20 to 22 million tonnes, but if the livestock industry develops that will go up to 30 million tonnes and the rest could be exported. In other words we have the ability in the medium term to export 30 million tonnes in a good year. Ukraine in any case will operate on a world level. Our grain production and export potential has barely been tapped. WG David McKee is a grain industry consultant providing market research and other services to companies seeking to initiate business in new markets. He can be reached by e-mail at: davidmckee59@msn.com We want to hear from you — Send comments and inquiries to worldgrain@sosland.com. For reprints of WG articles, e-mail reprints@sosland.com.